Alternative Investment: Vintage Classic Cars !

In the current period of high risky financial markets, alternative investments are increasingly in demand for diversification and hedging purposes. However, some tangible assets attract private investors wishing to combine Investment and their Passion: vintage cars are a good example. Initially reserved for exclusive aristocratic collectors during the 1950s and dominated by hobbyists’ collectors in the 1980s-1990s the Vintage classic cars market tends to be more and more accessible to different private investors classes since beginnings of 2000s. During this period, the market started progressively growing becoming regional, national and at the end global. Many collectors’ clubs or associations wins visibility with internet and specialized auctions appeared as information’s accessibility increased.

Today, this type of investment is more and more popular around the world and start to attract institutional investors to be included in their portfolio externalizing the knowledges of the market to expert or ‘’buyer’s of buyers ‘’. In addition, some items can be considered as Art piece as there are unique with their own characteristics etc … especially very rare cars produce for a particular events.

The classic cars can be ranked according to the country, as exemple, American, English, German French, Italian, etc … However, investors can be interested in a particulars period rather than a specific country.  Vintage Classic Cars are generally classified in various categories according to their age and  year of production. The Vintage Car Collectors Association provide the following classification method:

• Antique cars class ranks the eldest cars from the beginning of automotive to 1904
• Veteran cars class from 1905 to 1918.
• Vintage cars class from 1919 to 1930
• Post Vintage from 1930 to 1945
• Classic from 1945 to 1964
• Post Classic from 1965 to 1974

Overview of the Market

It is very difficult to estimate the size of the Vintage Cars markets as inventory of Cars do not include all eligible cars (generally Private collections). However, estimations realized in 2012 by the Histotica Selecta and the Classic Car Auction Yearbook, indicated that there are approximately 10 Million of collectors cars whatever the previous age categories. The market value of these cars are estimated at $ 120 Billion excluding the all related markets (insurance, restoration services, maintenance, transportation, etc …). The Ferraris cars represent the largest part of the market with $6 Billion.

There are many factors affecting the market size but the Liquidity and the Financing are the two majors influencers. Generally, Individual Investors are drive both by psychological factors and sentimental factors like nostalgia, pride, attachment to cars etc … and financial aspects like the pricing and growing value expectations for profitability and diversification purposes. Economics cycles also affect the market liquidity. Investor’s sentiments and “tastes” are at the end the main cause of cyclical movements in the market indicating what type and age of cars are most needed (fashion effect).

The auction price of cars is then dependent to this point but others factors affect its values.

• The scarcity and rarity: the limited production (and so few available stocks) are the most valuable car (associated to the prestige). However, a relatively common cars can be unique according to its historicity! As example, the Aston-Martin of James Bond, or the Ford Mustang appearing in Bullitt movies etc … or mythic original racecars wining prestigious races like 24h du Mans. The rarity is then related to the provenance of the cars.
• General Conditions and authenticity of the cars greatly affect the value. A cars in perfect conditions with no modifications both aesthetic and mechanics will be more valuable than others similar. Restorations are possible but should be realized with original pieces and strictly follow the original configurations. The Design both aesthetic and technical is then an important factor especially when a particular design is atypic or in advanced on this time.
• The reputations of the car makers. The Ferrari, Porsche and Mercedes-Benz vintage cars have a luxury reputation and Race pedigree while French old carmakers are well-knows for their aesthetic aspects sometimes in association with luxury brands.

Investing in vintage cars include also high related costs like Insurance, storage and maintenance. These three basics cost are extremely important to ensure the value of the car.

Some figures

Most expensive cars: the mythic Ferrari  !!

More common cars but high in demand and affordable